Shoppers squeezed by inflation and high interest rates for car loans are snapping up new cheaper vehicles and leaving pricier ones on dealer lots.

Cars under $50,000 have been selling faster and faster, while those above that price point have sat on lots longer and longer in recent months, data from Edmunds shows. In August, it took dealers 26 days on average to sell a sub-$50,000 car and 40 days to sell a more expensive model, and the gap is widening, as the chart below shows.

“People are hurting and they want to just buy cheap, straightforward transportation,” said Ivan Drury, head of insights for Edmunds.

That’s a reversal from recent years when low pandemic-era interest rates kept car loans cheap, and customers flocked to behemoth SUVs and pickup trucks costing $60,000 or more. 

Since March 2022, however, the Federal Reserve’s campaign of anti-inflation interest rate hikes pushed rates for car loans through the roof—as of September, the average new car loan rate was 9.61%, up from just over 5% at the outset of 2022, according to data from Cox Automotive released Tuesday.

At the same time, household budgets have been pressured by inflation and the 澳洲幸运5官方开奖结果体彩网:end of pandemic-era financ🌺ial support from the government, leaving less room in budgets for cars. As of September, half of all households could only afford a monthly car payment of $400 or less, far short of the average $770 monthly payment for a new car, according to Cox Auto data. The same report showed 83% of consumers considered buying a new car to be out of reach, according to a survey. 

Customers have been “buying fully configured cars, SUVs with every single bell and whistle, four-wheel drive, whatever upgraded motor they wanted, paying too much money for specialty colors,” Drury said. But now, he said, they are reaching their limits because of higher interest rates.

Having shifted their offerings along with consumer preference in recent years, U.S. automakers have largely stopped making the kind of cheap car that is now in higher demand, with car lineups from the Big Three Detroit automakers virtually devoid of the kind of small sedan and hatchback that was once considered standard ꧅transportation. 

There is no doubt that affordable cars have become an endangered species. As of December of 2022, only 4% of new cars sold for less than $25,000, down from 17% in 2017, according to an analysis by Kelly Blue Book. Carmakers had cut the number of models in that price range to 10 from 36 over that time. As of February 2023, there were only tℱhree models selling for less than $20,000, none of them mad🦩e in the U.S.

“Consumers have long demanded well-contented, larger vehicles,” Drury wrote in a commentary. “That’s likely still the preference, but now their behavior seems to be shifting since many can no longer afford them.”